Product vs Service: Choosing the right one for your Business

4 min readMay 18, 2022


Small business owners are faced with several challenges; there are endless decisions that have to be made concerning the business regarding financing, marketing, planning, and operations. However, all these depend on what type of business you operate, and a major factor to consider is whether your business is product-based or service-based.

As the name implies, a product-based business sells tangible, physical products for consumers, such as shoes, jewellery, hair, and clothes. In contrast, a service-based business is one where skill and knowledge are traded for money, services such as tutoring, banking, consulting, and plumbing fall into this category.

How does a business decide whether to be product-based or service-based? It is a crucial decision that will determine every other aspect of your business. There are several factors to consider in choosing which is right for your business and which one your small business can take on and handle. In this article, we will discuss the pros and cons of each because, as we all know, what has an advantage also has a disadvantage.

PROS of Product-based Business

In a product-based business, it is essential to note that it is easier to create a product that would almost be needed by people rather than creating a specific service that might be limited because not everyone may not be interested in the service being rendered.

Products can be created on a huge scale with different product types; however, things are limited when it comes to working hours for a service-based business.

Both product-based businesses and service-based businesses require managing people. Still, the product-based business is less complex because, after the manufacturing of the products, it does not have much complexity to it. The service-based business focuses more on managing people, leading to many risks.

CONS of Product-based Business

One of the cons of the product-based business is that cash flow is a must because you need capital to continue your product development for product-based businesses. You also need to keep improving on your product and conducting market research regularly to stay up-to-date with the demands of your consumers. This can be a hassle for small businesses as it would take a lot of time and money to carry out.

Another con is that there is no guarantee that people will like your product, especially when there is a large market to choose from. This is risky because it could lead to debt, and you might have to end your business. Your product would be competing with larger firms that have more market share. You have to create a product that has a need in the market and is separate or better than what is available so your business can make sales.

PROS of Service-based Business

For a service-based business, you need a minimum capital to begin with to be able to cover the expenses of your workforce. As long as you get your first customer, your business can start, which reduces the capital needed. Only the start-up capital is needed for the service-based business.

The cost of operating a service-based business is highly favourable for small businesses because, apart from the initial capital, there are other expenses that your business would not need to worry about. As a new service provider business, you can work with yourself and a small group of employees at no cost of warehouse or office space. The major focus would be on branding and marketing to find your target audience. Word of mouth marketing is advantageous for a service-based business that requires zero expense.

CONS of Service-based Business

The cons for service-based businesses include the following; firstly, it would be hard to scale because the business process requires more people to deliver services for the company to grow, unlike the product-based business. A small business with a few employees rendering services would be challenging to grow as there is a limit to the number of clients you can take on.

A service-based business might be low in revenue because it would need to have steady services to make a steady income. This means that if there aren’t a lot of services to be rendered by the business, there won’t be enough revenue coming in. Also, the expertise and experience of workers in a service-based business are very important as that would determine the skill level of the services they provide. It can reduce the amount of income earned and even restrict the kinds of clients they receive.

There needs to be customer service dedication for a service-based business because the basis of satisfaction lies on the client. How they perceive your service matters, which can be tricky. In a product-based business, the products are made based on need and demand, so satisfaction is regular. However, a service business depends on the client and their feelings, which varies from person to person.

Both product-based and service-based offer some form of products to their customers, and they both have the potential to be profitable. It all depends on which you can give your efforts to as a business owner. What aspects are important, and what can you compromise on? Your business, your choice.

However, we are currently in a world where innovation is helping businesses enjoy the benefits of both worlds. Service-based companies are learning to productize their services; likewise, product-based companies are learning servitization.

Our sister company BizPartner offers business consultation and advice in making decisions. Visit to learn more, and let’s chat. Pls, let us know your thoughts on this article.




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